Sector Snap: FDA nod boosts diabetes drugmakers

NEW YORK 
Shares of several drug developers focusing on diabetes drugs advanced Tuesday following the Food and Drug Administration's approval of Novo Nordisk's once-daily drug Victoza.

The regulatory decision could open up a clearer path for other drugs within the GLP-1 class of diabetes treatments, including Eli Lilly & Co. and Amylin Pharmaceuticals Inc.'s potential once-weekly treatment. GLP-1 analogues help increase the body's insulin production.

U.S.-traded shares of Denmark's Novo Nordisk rose $2.43, or 3.7 percent, to $68.31 in midday trading after the FDA approved Victoza, which has been under review for nearly two years. Safety concerns have hung over some of the drugs within the GLP-1 class of treatments, and Victoza was approved with a warning over the risk for thyroid cancer and the requirement of a risk-mitigation strategy.

Jefferies & Co. analyst Thomas Wei reaffirmed a "Buy" rating on Amylin and boosted his price target to $26 from $22, citing confidence in exenatide because of a seemingly safer profile for cancer risk and its effectiveness in studies.

"Victoza approval bodes well for exenatide (LAR's) prospects, both on approval and commercial prospects," he wrote in a note to investors.

Shares of Amylin rose $2, or 11.5 percent, to $19.45. They earlier set a new year high of $19.99, topping a previous peak of $18.14. Shares of Eli Lilly rose 38 cents to $36.13.

Separately, Citi analyst Dr. Yaron Werber upgraded shares of Amylin to "Buy" from "Hold." He said he expects the FDA to approve exenatide LAR "at some point," citing lower regulatory risks following the Victoza approval. Still, the approval timelines are unknown, he added.

The Victoza approval could also bode well for Vivus Inc.'s potential obesity drug Qnexa, said Merriman Curhan Ford analyst Michael G. King Jr. in a note to investors.

"The ability to put the risk-benefit ratio into the proper perspective suggests to us that there is no blanket regulatory bias for or against drugs for diabetes and obesity," he said.

He expects the FDA to take a balanced approach to Qnexa, which is already under review. He reaffirmed a "Buy" rating on the stock, which rose 10 cents to $8.78.